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Environmentalists urge NARUC to protect the poor by phasing out gas distribution

Environmentalists and ratepayer advocates implored utility regulators to begin retiring natural gas distribution systems, warning that any failure to plan for a shift to electrification in buildings puts low-income ratepayers and communities of color at risk.

The groups made their case during a panel on gas bans hosted by the National Association of Regulatory Utility Commissioners, or NARUC. With building electrification already underway and gaining momentum, regulators should guide the transition to prevent people with low incomes from being stuck in a "death spiral" in which the cost of service rises for a shrinking customer base as affluent Americans exit the gas utility system, the panelists said.

"There needs to be a transition plan," said David Kolata, executive director for Illinois ratepayer advocate Citizens Utility Board, during the July 17 webinar. "How are we going to manage if we are over time transitioning to electric heat? How can we make sure that equity is maintained, that low-income consumers aren't left holding the bag, and that we can maintain the natural gas system safely while we are phasing it out?"

The industry previewed its playbook for fighting gas bans during a November 2019 NARUC panel. It has since evolved that strategy, which includes state legislation prohibiting local governments from adopting gas bans.

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Kolata and other panelists said utilities should prepare for the transition to electrification by immediately stopping gas system expansion and minimizing investments in existing gas infrastructure. It was a vision that goes against conventional wisdom. In recent years, regulators have approved accelerated pipeline replacement programs, which are a major driver of utility revenue growth.

Kolata said averting the worst consequences of climate change now requires decarbonizing building heating. In his view, electrifiying space and water heatingwhich account for about 90% of gas consumption in U.S. homesis the cheapest option. Even as regulators greenlight investments to maintain, upgrade and improve gas distribution systems, the learning curve for electric heating technology such as heat pumps is accelerating, with costs falling and quality rising, Kolata said.

The status quo on gas system investment will produce stranded assets, Kolata said. Prudence dictates that regulators should follow the example of dozens of local California governments and consider mechanisms for requiring all-electric new construction, Kolata said.

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"We need to have a comprehensive planning process, and it needs to start immediately," Kolata said. "This is not an issue that we can put off. Every day is another day when this stranded cost risk builds, and that's a significant concern from a consumer advocate point of view."

Regulators should focus first on moving families already struggling to pay their bills off the gas system, according to Mark Kresowik, a regional deputy director for the Sierra Club's Beyond Coal campaign.

The transition should start with an analysis of any new investment in the gas system to determine if it can be avoided, Kresowik said. He pointed to the New York Public Service Commission's proceeding to overhaul gas planning and prioritize non-fossil-fuel infrastructure solutions. Next, regulators and policymakers should plot out whole-home retrofits at no cost to consumers, starting with low-income residents. Finally, states should create strategic electrification programs to identify parts of the gas system they can shut down and convert to alternative energy sources.

Any program will require measures to mitigate gentrification and prevent people with low incomes from being displaced from newly converted areas, Kresowik added.

Zeyneb Magavi, co-executive director at building decarbonization advocate Home Energy Efficiency Team, said "gas bans" and "gas plans" are distinct from one another, and today's gas utilities have a place in the latter approach.

One option Magavi presented was a "geomicro district": a network of ambient-temperature water loops that customers would access through heat pumps, potentially backed up by biogas and hydrogen. Today's gas utilities could incrementally replace the current distribution system with such districts along existing rights of way, helping to keep pipe workers employed while avoiding a cost death spiral, assuring resilience, and flattening electric grid load.

"That's just one option we need to explore," Magavi said. "There are many, and we need to be generating more in my opinion, debating their merits and analyzing their paths forwardbecause failure to act on these risks that we have all presented at the state and national regulatory level is a lost opportunity to lead, to have the courage to reimagine and rebuild our energy system."